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How to fix Alaska’s fiscal problem for the long-haul (hint, it doesn’t involve draining state savings accounts)

  • Author: Ronnie Chappell
    | Opinion
  • Updated: June 26, 2017
  • Published June 26, 2017

As a 24-year Alaskan who has lived Outside for the last 15 years, I have closely followed efforts by your governor and Legislature to deal with massive state budget deficits. It has been sad and frustrating to watch. So, here's an "Outside" perspective from someone who still cares about Alaska but is economically indifferent to what happens there.

First, using state savings accounts to fill massive state deficits for the sake of propping up the Alaska economy has been short-sighted, stupid and, on the part of politicians, cowardly.

Two, if Alaskans truly cared about the kind of place Alaska will be a decade from now, they would have preserved the Constitutional Budget Reserve and spent the earnings instead – sustainable annual earnings of hundreds of millions of dollars. A $13 billion CBR could have generated $650 million a year – year after year after year. At the end of the coming fiscal year, according to press reports, only $2 billion will be left.

Three, rather than face reality, Alaskans are praying oil prices will substantially increase (not likely in the near- or medium-term) or that the state can squeeze a little more cash out of the golden goose. Many are opposed to paying taxes themselves or surrendering their dividends because they know when crunch time comes, they can hand their house keys to the banks and move Outside. That's what happened in 1986 when oil prices plummeted and a single Cook Inlet sockeye was worth more than a barrel of North Slope crude. If memory serves, 40,000 people moved out of Anchorage in a single year. Almost overnight, you could buy an $80,000 condo for $15,000.

Those who leave won't care that Alaska schools are crap, Alaska roads pockmarked and Alaska fisheries poorly managed. They'll be gone and the fiscal hole they leave behind will be deeper and much more difficult to close for those who stay.

The first rule of holes is to stop digging when you find yourself deep inside one.

That means making all state spending need-based.

Alaskans have different views on what constitutes an essential government program or an appropriate level of government expenditure. The debate over oil industry investment credits, for example, is a healthy one. Others – a defined-benefit or defined-contribution public employee pension plan – come to mind.

One thing is certain. Making all state spending need-based would result in the elimination of the Permanent Fund dividend. Every year these checks are paid to the young and old and the rich and poor whether they need the money or not.

Critics complain eliminating the PFD would disproportionately affect low-income Alaskans. In a world of constrained government resources that might not be true. A poor child would surely benefit more from a quality, well-funded school than from a dividend spent on a big-screen TV or a plane ticket at spring break. Adverse impacts could be mitigated by expanding social welfare programs and increasing rural power and transportation subsidies, or by simply making the dividend a need-based program like food stamps. Apply and receive a check if you qualify.

Before the 1986 oil crash, state Pioneer Homes were cost-free to the elderly Alaskans lucky enough to obtain a placement. Every Alaskan on Social Security also received a non-need-based longevity bonus of $3,000 a year.

Pioneer Homes are no longer free and the longevity bonus died years ago. Even for a place as rich as Alaska was then, they weren't sustainable. Neither is a Permanent Fund dividend that is paid to everyone and taxed back from the well-to-do so Alaskans don't have to call it welfare.

Finally, if you care about what Alaska will be a decade from now, enact an income tax today. The revenue should be used to halt withdrawals from state savings accounts and to fund real needs like schools, roads and Medicaid. It shouldn't be used to take dollars from one Alaskan to give to another who hasn't a proven need.

Since leaving Alaska in 2002, I've grown accustomed to paying state income taxes. Alaskans can too if they perceive them as fair and essential to creating a stable future for themselves and their children.

Ronnie Chappell is a lapsed Anchorage Daily News reporter who found work in the Alaska oil industry before retiring to Williamsburg, Virginia.

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